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Carlyle takeover, was Cain Hoy takeover

Re: Cain Hoy takeover

Monitoring%20Periods.jpg


1. Losses over €5m

UEFA are keen to ensure that clubs don't go deeper and deeper into debt so insist that any clubs losses over €5m during a single Monitoring Period are fully funded by their owner. In practice this means that clubs can only lose up to the maximum €45m during the first Monitoring Period if their owner is able and willing to put their hand in their pocket for any loss over €5m and, in UEFA's terminology, 'convert the loss to equity'. But what does this term mean and what are the implications? Let's use an example of a club losing €30m during the first Monitoring Period. We can see that the club passes the Break-Even test (as the loss is below the €45 threshold). However the €30m loss is above the €5m figure and the owner will need to take some action. In this example the club will create additional shares which the owner will have to buy for €25m (the difference between €30m and €5m). The Club will gain €25m in cash (ensuring the club's overdraft/debt doesn't increase) and the owner will be out of pocket by €25. However, the owner will now hold a potentially worthless paper share certificate. The problem for the owner is that they may never get their €25m back again they might possibly get it back if they sold the club, or if the club makes a profit in future years and he gets paid a dividend). This scenario might not trouble Abramovich or Sheikh Mansour but is the irksome prospect facing the owners of clubs such as Saudi Sportswashing Machine, Sunderland and Aston Villa.

2. Permitted Exclusions

I should also point out that the level of loss that a club reports in their financial accounts will not be the same figure as is used in the Break Even calculations. This is because UEFA have allowed clubs to exclude certain expenditure from the calculations. UEFA are keen to develop the game and don't want the FFP rules to constrain clubs from investing and developing - without any exclusions a club building a new stadium or new stand would be hit by an FFP penalty (the cost of the development would mean the club reported a large financial loss). Clubs can therefore exclude infrastructure development costs and youth development/community development costs. Emirates Marketing Project announced that they should be able to exclude around £10m a year as a result of the youth/community exclusion.

There is one other exclusion that causes most confusion amongst journalists and fans; clubs are able to exclude certain wages for their long-standing players. By way of background; when the rules were first proposed, some clubs complained that they were already committed to paying high wage bills for some players on existing contracts and that they could fail the Break Even test as a result. UEFA therefore introduced an appendix to the rules which allows clubs who have failed the Break Even test to run the test again, but this time deduct the wages paid to players on pre-June 2010 contracts. However clubs can only deduct the wages paid to their long-standing players during one season (2011/12) and can only use the exclusion if they can show their Break Even deficit is reducing each year. Chelsea, for example, will probably find that they are not able to deduct the wages paid to Terry, Lampard, Drogba etc during 2011/12. This is because club losses are likely to increase in 2012/13 (they won the Champions League in 2011/12 and are likely to see their UEFA receipts and commercial income reduced in 2012/13).

3. Transfer Fees

An important part of the rules relates to the way that player transfers have to be accounted for. Although a club will often pay a transfer fee to another club immediately, from a Break Even perspective the financial cost of acquiring a player has to be written-off over the duration of the contract. We need an example: let's assume Torres was signed for £50m on a 5 year contract and that Chelsea paid Liverpool £50m via an immediate bank transfer. As far as the Profit & Loss section of accounts is concerned (and the Break Even test), Torres' purchase price would be depreciated (or amortised) evenly over the 5 years of the contract. So, during the first 12 months, only £10m would be incurred as a cost in the accounts and Torres would end the year with a 'book value' of £40m. After 5 years, Torres' contract would have ended and he would be free to leave the club (he would also have a book value of zero). If the club sells Torres part way-through the contract, the club the difference between the amount they receive for the player and the book value at the date of the sale is accounted for immediately in the accounts (and the Break Even test) as a 'loss/profit on player trading'. This is important as it explains how a club can sell a player for below the original purchase price and still record a profit in the accounts during the year of sale. If Liverpool sell Andy Carroll for anything above £18m in the summer, they will record the difference as a profit on player sales during 2013/14. If we assume that Falcao comes to Chelsea for £50m on a 5 year deal in the summer, the club's P&L account for the year will only include £10m as an expense (under the heading 'amortisation'). The club will also, of course, have to include the player wages as an expense in the Profit & Loss account. If you want to know more about 'amortisation', see the video at the foot of this page.

4. Fair Value

UEFA are aware that owners of clubs could look to inflate a club’s profitability by injecting funds into clubs via artificially inflated commercial deals. Paris St-Germain recently announced a huge sponsorship deal via a body that is connected to the club owners. For this reason UEFA FFP rules require any transaction from a ‘related part’ (i.e. a company or body connected to the club owners) to be assessed to ensure it was a genuine transaction at a ‘fair value’. UEFA has the power to adjust any artificial ‘mates rates’ deals and apply a lower value to the Break Even calculation. This assessment will be carried out by the CFCB panel (see below).
 
Re: Cain Hoy takeover

"Proper owners"????????

You do realise that Abramovich and Mansour are outliers, right? They're not the norm. Besides, there's no such qualification as a "proper owner". There are those who own football clubs and there are those who don't. That's all. Of course, there are different types of owner - none of them more "proper" than another. There are parasites - like the Glazers. There are billionaire benefactors (very rare birds). And then there are the remainder - all doing the best that they can with the resources available to them, with varying degrees of success (or abject failure).



What "golden opportunity"? It's fine to be excited about what a takeover might mean. But you know next to nothing about Cain Hoy. So why are you so keen to throw yourself unquestioningly into their arms? Are you aware, for instance, that Todd Boehly's speciality is leveraged credit? Fancy a bit of that? How about a little smidgeon of caution and prudence instead? At least let's hear what they've got to say before bending over and spreading our cheeks.

The key question. While the balance of evidence so far suggests that Cain Hoy will be more like Lerner/ Kroenke/FSG, there is the possibility of a Hicks style takeover, with lots of promises.

If we look at the two dangerous examples, we are looking at the two most successful clubs in the English game. United are a financial juggernaut and could survive financial payments of more than 700m. Even they are now seeing the effect on the field. So many United fans are in denial about the damage the Glazers have done (it is all Moyes).

Then we have Liverpool, the second most successful club domestically and they were nearly brought down. I don't know how many people here followed their high court proceedings but they were lucky. The judge was ****ed off with stupid judgements from Texas courts and after rightly slapping them down make some very favourable decisions for Liverpool. One of our two biggest clubs was close to serious trouble. If we got in similar trouble we wouldn't survive.

I suspect a takeover by Cain Hoy would be largely neutral, but I'd rather not test the water. I see little significant upside, but there is a serious risk. My judgement is that it is low probability, but the potential damage is huge. If we had the possibility of a Shiekh, then maybe it is worth the risk, but for switching investment companies?
 
Re: Cain Hoy takeover

What's romantic exactly about the title for City?
It's the equivalent of winning on FIFA by editing the team to have all the best players in.
I'm sure it feels great to win after all the ****e they went through, but nothing changes the fact Man U earned their titles, City purchased it.

Dortmund and Athletico are examples of how it can be done properly. Even Arsenal, and Liverpool last season, too

Dortmund and Atletico operate in domestic leagues where the Champions League places are not all but sewn up before the season even starts. In Germany, only Bayern is bigger than Dortmund. In Spain, only Real and Barca are bigger than Atletico (though a financially healthy Valencia would run them close). Not to mention, of course, that Atletico's modus operandi (tax arrears in the hundreds of millions of pounds; third party agreements etc.) simply wouldn't be tolerated in England.

As to Arsenal and Liverpool, they have the advantage of having got in on the ground floor. Original members of the Sky Four; Champions League perennials; global fan bases that dwarf ours...........their earning potential is so much greater than Spurs' that it will remain a huge feat to beat either of them to a CL place. We can't always rely on stadium debt induced financial prudence or a Gillette & Hicks train wreck to help us in that regard. They exist in a virtuous circle of success and money. Clubs on the outside, like Spurs, exist in the concomitant vicious cycle. Without a generous benefactor, it is likely that Spurs will always be swimming against the tide to catch up. We may have successes. But they will likely be modest. And few and far between. We will continue to be plundered for our players and powerless to prevent it. And each time that happens, the hard slog will have to start all over again. Soul destroying.

All this for no other reason than lousy timing on our part. We just happened to be **** under the stewardship of a bullheaded and dimwitted (in football terms) owner at the time that football changed irreversibly. Alan Sugar failed to grasp the opportunity that the nascent Premier League and Champions League offered. But should we always suffer as a consequence? Is it right that we (and other clubs) should evermore live in the shadow of those few clubs that just happened to get their timing right?

monkeybarry, you imply that Man Utd being able to spend hundreds of millions is fine.............because "they earned it". Well maybe they did. They got lucky by coming good at just the right time. But it still doesn't make for fair sport, does it? Not against clubs that have a quarter of their budget. There's nothing fair about the Sky Four and the enormous financial advantage they enjoy over the rest. And fair sport is the ideal that we're after, right? Not some earned it / didn't earn it formula.

So let owners spend what they want, I say. Why the hell not, so long as they don't get their clubs into debt in the process? That way, a Southampton or a Sunderland fan can dream again. Dream that their clubs might one day be relevant again. Dream of more than just Premier League survival or a top half finish.

Money has ruined football. And the only way that it can now help to heal football is if even more of it comes into the game and is more widely shared around.
 
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Re: Cain Hoy takeover

But you cannot invest fcuking 2 billion FFS will people stop saying a new owner can invest billions into a fcuking team. ](*,) I think the most is something like 40m in the red. FFP does not allow these types of owners any more.

I'm reasonably confident that if any owner challenged UEFA in the European courts, they'd win. How can a company owner be prevented from investing in his company? I don't see how such a rule could be upheld.
 
Re: Cain Hoy takeover

I'm reasonably confident that if any owner challenged UEFA in the European courts, they'd win. How can a company owner be prevented from investing in his company? I don't see how such a rule could be upheld.

I am not so sure. UEFA did not impose it, the clubs voted in favour of introducing it
 
Re: Cain Hoy takeover

I am not so sure. UEFA did not impose it, the clubs voted in favour of introducing it

You might be right. I defer to you.

But it is UEFA which surely administers FFP?

Anyway, regardless of who would have to make the case for the defence, I'd be very surprised if FFP wasn't hugely vulnerable to any moderately competent case against it.
 
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Re: Cain Hoy takeover

You might be right. I defer to you.

But it is UEFA which surely administers FFP?

Anyway, regardless of who would have to make the case for the defence, I'd be very surprised if FFP wasn't hugely vulnerable to a halfway competent case against it.

I think that UEFA's defence against that would be that they are the rules of a competition that were agreed by the clubs competing in them and that clubs are not obliged to enter their competitions.
 
Re: Cain Hoy takeover

UEFA imposed it in conjunction with the clubs and the European Commission. The European Court tends to allow such consensus. The response to Bosman/Webster-type rulings is usually a negotiated result, very different from a court making decisions based on a constitution or centuries of case law.
 
Re: Cain Hoy takeover

I think that UEFA's defence against that would be that they are the rules of a competition that were agreed by the clubs competing in them and that clubs are not obliged to enter their competitions.
This is the answer.

UEFA don't say "you can't spend", they say "if you want to qualify for our competition you must......."
 
Re: Cain Hoy takeover

I think that UEFA's defence against that would be that they are the rules of a competition that were agreed by the clubs competing in them and that clubs are not obliged to enter their competitions.

Yes, I'm sure it would.

But given that the Champions League is so critical in so many ways to the financial success of a club, I think it very likely that a judge would rule that it isn't legally enforceable. Certainly, I've read opinions from a number of respected legal minds who reckon that FFP wouldn't stand a chance in court. At the moment, it's hanging on the goodwill and cooperation of the clubs. That's unlikely to last forever.
 
Re: Cain Hoy takeover

Yes, I'm sure it would.

But given that the Champions League is so critical in so many ways to the financial success of a club, I think it very likely that a judge would rule that it isn't legally enforceable. Certainly, I've read opinions from a number of respected legal minds who reckon that FFP wouldn't stand a chance in court. At the moment, it's hanging on the goodwill and cooperation of the clubs. That's unlikely to last forever.

I need to read more on this. I am starting here

http://www.soccernomics-agency.com/?p=469

I will be back when I am more knowledgeable (or can at least pass someone else's knowledge off as my own).
 
Re: Cain Hoy takeover

I am happy with ENIC but if they want to sell you have to assess the possible new owners. Cain Hoy has real money potentially, successful businessmen and a genuine Spurs fan aboard. Doesn't fill me with dread. Makes me nervous but not scared for the future of the club I love.


:-k
 
Re: Cain Hoy takeover

I'm reasonably confident that if any owner challenged UEFA in the European courts, they'd win. How can a company owner be prevented from investing in his company? I don't see how such a rule could be upheld.

The same way your only allowed 11 players on the pitch.
 
Re: Cain Hoy takeover

Excellent points from Dubai Spurs as usual.

I know a few Chelsea supporters and they're all happy overall with the way things have gone under RA. I don't know any City supporters, but the joy on their faces that I saw on TV when they pipped Utd to the title suggests to me they have a lot of happy fans. I know I'd be in seventh heaven if we were as successful as those two clubs have been.

IF Cain Hoy take over I don't expect us to match Chelsea and City's level of success, I do expect them to improve on ENIC's and am just hoping this takeover can happen. If not them, then someone else with serious cash and intentions ASAP.
 
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Re: Cain Hoy takeover

IF Cain Hoy take over I don't expect us to match Chelsea and City's level of success, I do expect them to improve on ENIC's and am just hoping this takeover can happen. If not them, then someone else with serious cash and intentions ASAP.

Just so that we can be clear, how much would you like new owners to put into the club, how long would you like the spending to continue and what would you like it spent on?
 
Re: Cain Hoy takeover

Just so that we can be clear, how much would you like new owners to put into the club, how long would you like the spending to continue and what would you like it spent on?

I'd like them to put as much in consistently as City and Chelsea have. I realise that's unlikely though, so would settle for getting the stadium finished while still spending enough to give us a great chance of winning something.
 
Re: Cain Hoy takeover

I'd like them to put as much in consistently as City and Chelsea have. I realise that's unlikely though, so would settle for getting the stadium finished while still spending enough to give us a great chance of winning something.
Thanks. I assume that would also mean the wage bill increasing to retain our best players and recruit the kind of players that our competitors want.
 
Re: Cain Hoy takeover

Thanks. I assume that would also mean the wage bill increasing to retain our best players and recruit the kind of players that our competitors want.

Thanks for your reply in turn. Yes, an increased wage bill would be necessary to start to become competitive with the Big 5.
 
Re: Cain Hoy takeover

Thanks for your reply in turn. Yes, an increased wage bill would be necessary to start to become competitive with the Big 5.
Cheers. One last question and then I'll leave you in peace. Given that the league table usually mirrors total wage bills, would you want us to keep track with the salaries paid by the 4th or 5th placed club?
 
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